Despite the Trump administration’s determination to shred Biden-era climate protections, there remains a “sense of optimism” that the energy transition will prevail, Citigroup ESG analysts led by Anita McBain wrote in a note. 

The energy transition is more advanced today than during Trump’s first term, and the desire to generate cheap, secure sources of power fit the “smart, technologically innovative, policy-supportive, and economically viable solutions” that green energy offers, they said.

Within hours of taking office on Jan. 20, Trump began dismantling the climate agenda of his predecessor, and made clear he will double down on fossil-fuel extraction. Executive orders include dragging the U.S. out of the Paris climate agreement, halting over $11 billion, annually, of international climate assistance and shelving clean energy subsidies at home.

The pace and breadth of Trump’s actions have left climate campaigners and analysts reeling, and triggered a selloff in renewable energy stocks. 

But none of the short-term fallout of Trump’s policies changes the fact that there remains a “compelling case” in favor of a transition away from fossil fuels, the Citigroup analysts wrote.

“Clean energy is cheaper, more widely available, and more efficient,” they said. “For advocates of clean energy transition, the power of economics will prevail.”

Those trying to generate financing for clean-energy projects outside the U.S. say they’re not expecting Trump’s policies to alter the flow of capital in any meaningful way.

Christian Kleboth, head of debt mobilization at the London-based European Bank for Reconstruction and Development, says there continues to be considerable demand for financing for clean energy in Europe, Central Asia and the Mediterranean region.

“There’s a lot of dependence on fossil-fuel imports in many of our countries and that is something that these countries and our clients in these countries are very aware of,” he said in an interview. “That’s why they’re very keen to invest into renewable energy,” not only for energy security but also for price competitiveness, he said.

Kleboth also said that the private sector in those markets “is investing very heavily in renewables and I don’t see that changing. If anything, it would probably increase.”

The Citigroup analysts also touched on Wall Street’s exit from the world’s largest climate-finance alliance for banks, known as the Net-Zero Banking Alliance. The exodus from NZBA, including Citigroup’s own decision to leave, “neither impedes progress nor dilutes efforts” to transition the economy away from high-carbon assets, according to the analysts.

Since the beginning of December, banks that have abandoned NZBA include Goldman Sachs Group Inc., Morgan Stanley, Wells Fargo & Co., Bank of America Corp. and JPMorgan Chase & Co. Many of Canada’s biggest banks have since followed. The departures mean the lenders are now less likely to find themselves in the crosshairs of the Republican Party, which has stepped up attacks on climate finance since Trump’s election victory.

Banks that have quit NZBA say the decision won’t affect their commitments to decarbonize their business and support clients in their transition to cleaner energy sources.

The Citigroup analysts said investment in climate-smart infrastructure “is about creating value, and smart, risk-adjusted returns and insuring, at a macro level, that economies move forward with technologies of the future.”

At the same time, Citi Research maintains a bearish view on Brent crude oil, since Trump’s “Drill, Baby, Drill” agenda will need additional measures to incentivize U.S.-focused capital expenditure and higher oil supply, the analysts wrote.